Speakeasy

Money is the lifeblood of any type of business and if you don’t have piles and piles of your own, there will come a time where you begin the hunt for capital. This is where investors come in. A venture capitalist typically involves corporate entities that use funds from other investors – sometimes large institutions – and manage that money by investing it in growth businesses while angel investors tend to be wealthy individuals who invest their own funds, providing a cash injection that can help the company build out its product. Many startup entrepreneurs meet angel investors or venture capitalists through networking and word-of-mouth, but you can also actively seek them using StartOpia’s Capitalists Directory.

Before pitching investors, make sure you have developed a solid presentation and business plan. Your presentation should outline your product, your market, your management team, why you think your product will sell and how much capital you need to raise in order to move forward with your plan. Lastly, create a short outline of the investment opportunity your company gives. Entrepreneur Jason Evanish says, "Just because you have an idea and you think you need help does not mean you're ready to raise money. Even if you get an investor interested, nothing will bring the conversation to a screeching halt quite like not knowing how much you want to raise and what you'll do with it. The questions are core to justifying the investment and showing you're prepared to lead an institutionally-funded business."

Not Conducting Research on the Investor

It is essential to your success in finding an investor to research their website and portfolio to see what types of investments they look for. Brad Feld, co-founder of the Foundry Group, encourages entrepreneurs to "look at what we've invested in and read the posts on why we invested. Talk to people that know us and get hints about us." If the investor’s website says they invest in health startups, most likely they won’t be interested in your animal shelter finder mobile app. Being able to display some mindfulness of the investor’s background and the businesses they have previously invested in will help foster conversation and show that you have done some research in advance for the meeting.

Failure to Listen

Be open to the potential investor’s suggestions and leave your pride at the door. “Most investors are direct and are going to ask you the tough questions. That's a good thing; it means they're thinking about your idea. Don't take feedback or tough questions personally or as personal attacks. Answer directly, and if you don't know, say so. Don't make something up,” explains entrepreneur Nathan Lustig. Often times, the questions are asked out of sincerity and to validate the investment of a large sum of money. Instead of resisting the investor’s suggestions, view them as being an examination of alternatives for you to consider. Take the time to think about the questions that were asked and look at the process as useful insight into the investor’s way of thinking.